Section 230-RICR-40-10-3.5 - ProvisionsA. Records/Record-Keeping 1. Each Person subject to the requirements of the Act shall maintain records for each and every loan file supporting and substantiating the tangible net benefit and/or High Cost Home Loan analysis performed during the transaction. a. Each Person subject to the requirements of the Act must keep a list of all loans in which the "tangible net benefit" has been assented to by the borrower. The Creditor is required to maintain on file and be in possession of documentation clearly identifying and substantiating the "tangible net benefit" that existed at the time the Home Loan was consummated. Failure to clearly identify, document, and substantiate the respective tangible net benefit will be deemed a violation of this Part, of R.I. Gen. Laws § 34-25.2-5(b), and a basis for administrative action pursuant to R.I. Gen. Laws § 19-14-13. The analysis performed regarding whether the borrower has a "tangible net benefit" must be accurate and based upon verified information as reflected by the Form 3 HLPA Disclosure entitled "Rhode Island Home Loan Protection Act Disclosure Tangible Net Benefit" as required by this Part.b. Each Person subject to the requirements of the Act must keep a list of all loans in which the High-Cost Home Loan has been assented to by the borrower. The analysis performed regarding whether or not a loan is a "High-Cost Home Loan" must be accurate and based upon verified information as reflected by the Forms 4 and HLPA 5 Disclosures entitled, respectively, "Rhode Island Home Loan Protection Disclosure High Cost Home Loan" and "Rhode Island Home Loan Protection Disclosure Consumer Caution and Home Ownership Counseling Notice and Certification" as required by this Part. Failure to clearly identify, document, and substantiate the respective High-Cost Home Loan will be deemed a violation of this Part, and a basis for administrative action pursuant to R.I. Gen. Laws § 19-14-13.c. The individual authorizing the Home Loan after reviewing said tangible net benefit and/or High Cost Home Loan analysis shall date and sign the written record of analysis by confirming that he/she has reviewed the analysis and confirms whether or not the loan is a High Cost Home Loan under the terms of the Act.d. All applicants must be provided with Disclosure Forms 1 and 2 within three (3) days of application. Verification of submission to applicant and fully executed copy of Disclosure Forms 1 and 2, provided in a bulletin issued by the Department for that purpose, must be maintained in each loan file.e. All Applicants who refinance a Previous Loan that was Consummated within the prior sixty (60) months must be provided with Flipping a Home Loan Disclosure Form 3 entitled "Rhode Island Home Loan Protection Act Disclosure-Tangible Net Benefit" prior to or upon Consummation of the Home Loan. Verification of the date of submission to Applicant and a fully executed copy of Disclosure Form 3, provided in a bulletin issued by the Department for that purpose, must be maintained in each loan file.f. All Applicants who are applying for a High-Cost Home Loan must be provided Disclosure Form 4 entitled "High-Cost Home Loan" and Form 5 entitled "Consumer Caution and Homeowner Ship Counseling Notice and Certification," provided in a bulletin issued by the Department for that purpose, at such time that it is determined by the Creditor that the new loan is a High-Cost Home Loan, but in sufficient time as to enable the Applicant to receive, prior to closing the loan, face-to-face counseling on the advisability of the High-Cost Home Loan transaction, with a third-party non-profit organization Verification of the date of submission to Applicant and a fully executed copy of Disclosure Form 4 and Disclosure Form 5 must be maintained in each loan file.g. All Persons subject to the Act must use the exact disclosure forms, provided in a bulletin issued by the Department for that purpose. The disclosures shall not be altered or changed in any manner.h. All Persons subject to the Act shall maintain evidence that includes a verifiable invoice or substantially similar document for Bona Fide and Reasonable Fees. Substantially similar documents may include, without limitation, a master service agreement with the service provider that is applicable to all loans. Such documents relating to Bona Fide and Reasonable Fees need not be maintained in each individual loan file.i. The above records, which may be maintained by optical imaging, electronically or in any manner which will allow retrieval, must be available to the Director of the Department or his or her designee.j. The above records shall in the case of a Creditor who is a loan broker, be maintained for a minimum of three (3) years from the application date, and in the case of a Creditor who is a lender, a minimum of three (3) years from the date a loan is paid in full or sold.B. Five (5) Prohibited Acts and Practices on All Home Loans 1. Financing of Credit Insurance Premiums or Any Other Health or Life Insurance Premiums or Debt Cancellation Charges. No financing, either directly or indirectly, of any credit life, credit disability, credit unemployment, or credit property insurance, or any other life or health insurance, or any payments either directly or indirectly for any debt cancellation or suspension agreement or contract. Any insurance premiums or debt cancellation or suspension fees calculated and paid in full on a monthly basis shall not be considered financed.2. Flipping a Home Loan. No knowing or intentional engagement in the unfair act or practice of "Flipping a Home Loan." Flipping a Home Loan is the making of a Home Loan to a borrower that refinances a Previous Loan that was consummated within the prior sixty (60) months when the new loan does not have reasonable, tangible net benefits in accordance with R.I. Gen. Laws § 34-25.2-4(q) to the borrower considering all of the circumstances, including, but not limited to, the terms of both the new and refinanced loans, the cost of the new loan, and the borrower's circumstances. a. Tangible Net Benefit: In order to make a loan to an Applicant that refinances a Previous Loan that was Consummated within the prior sixty (60) months the Creditor must confirm in writing and maintain a record of the tangible net benefit analysis as soon as it is determined, and, explain and provide Disclosure Form 3 to the Applicant prior to or upon Consummation of the Home Loan. The Creditor is required to confirm a tangible net benefit" as defined in R.I. Gen. Laws § 34-25.2-4(q)(1) through (6): (1) New Monthly Payment: The Applicant's/borrower's new monthly payment(s) must be lower than the total of all monthly obligations being financed, taking into account the costs and fees as disclosed on the Closing Disclosure Form. The "new monthly payment" on any loan product other than a conventional fixed rate mortgage would be the payment that fully amortizes the mortgage loan over the term of the loan at the highest rate of interest that may be charged under the contract over the term of the loan. Costs and fees as disclosed on the Closing Disclosure Form shall include all costs and fees regardless of whether incorporated into and financed through the subject loan. The "taking into account" and time for recouping of such costs and fees shall be calculated over a period of twenty-four (24) months and said amount should be added for the calculation of the final "new monthly payment" for purposes of R.I. Gen. Laws § 34-25.2-4(q)(1).(2) Beneficial Change in Amortization Period. There must be a beneficial change in the amortization period of the new Home Loan(s).(3) Borrower Receives Cash in Excess of Costs and Fees. The Borrower receives cash in excess of the costs and fees as disclosed on the Closing Disclosure Form as part of the refinancing. A borrower receives cash in excess of costs and fees when the borrower receives funds and/or proceeds beyond the amount required to payoff existing Previous Loan(s) plus all fees and costs associated with the Home Loan.(4) Current Interest Rate is Reduced: The Previous Note Rate of interest is reduced or in the event that more than one Previous Loan is being refinanced, the weighted average note rate of the Previous Note Rate of interest is reduced.(5) Change from Adjustable Rate Loan to a Fixed Rate Loan.(6) Bona Fide Personal Need: The refinancing is necessary to respond to a bona fide personal need as verified in Disclosure Form 3, provided in a bulletin issued by the Department for that purpose. The borrower must disclose and the Creditor must verify the specific nature of the "bona fide personal need."3. Encouraging or Recommending Default. No Creditor shall recommend or encourage default on an existing loan or other debt prior to and in connection to the closing or planned closing of a Home Loan that refinances all or any portion of such existing loan or debt.4. Acceleration in Creditor's Sole Discretion. No Home Loan may contain a provision that permits the Creditor, in its sole discretion, to accelerate the indebtedness. This provision does not prohibit the acceleration of the Home Loan in good faith due to the Applicant's/Borrower's failure to abide by the material terms of the Home Loan.5. Requiring Borrowers to Assert Claims in Less Convenient, More Costly, or More Dilatory Forum. No Home Loan may contain a provision that allows a party to require an Applicant/borrower to assert any claim or defense in a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute than a judicial forum established in this state where the Applicant/borrower may otherwise properly bring a claim or defense or limits in any way a claim or defense the borrower may have.C. Prohibited Acts: High-Cost Home Loans 1. Pursuant to R.I. Gen. Laws § 34-25.2-6 a High-Cost Home Loan is also subject to additional limitations and prohibited practices as follows: a. In connection with a High-Cost Home Loan, no Creditor shall directly or indirectly finance any points or fees which total is greater than five percent (5%) of the total Home Loan amount or eight hundred dollars ($800) whichever is greater.b. No prepayment fees or penalties shall be included in the Home Loan documents for a High-Cost Home Loan.c. No High-Cost Home Loan may contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments. This provision does not apply when the payment schedule is adjusted to the seasonal or irregular income of the borrower.d. No High-Cost Home Loan may include payment terms under which the outstanding principal balance or accrued interest will increase at any time over the course of the loan because the regularly scheduled periodic payments do not cover the full amount of interest due (this is known as Negative Amortization).e. No High-Cost Home Loan may contain a provision that increases the New Note Rate after default. This provision does not apply to New Note Rate changes in a variable rate loan otherwise consistent with the provisions of the High-Cost Home Loan documents, provided the change in the New Note Rate is not triggered by the event of default or the acceleration of the indebtedness.f. No High-Cost Home Loan may include terms under which more than two (2) periodic payments required under the High Cost Home Loan are consolidated and paid in advance from the loan proceeds provided to the applicant/borrower.g. A Creditor may not make a High-Cost Home Loan without first receiving certification from a counselor with a third-party nonprofit organization approved by the United States Department of Housing and Urban Development that the applicant/borrower has received counseling on the advisability of the loan transaction.h. A High-Cost Home Loan shall not be extended to a applicant/borrower unless a reasonable Creditor would believe at the time the High-Cost Home Loan is closed that one or more of the applicant/borrowers will be able to make the scheduled payments associated with the High-Cost Home Loan based upon a consideration of his or her current and expected income, current obligations, employment status, and other financial resources, other than the borrower's equity in the collateral that secures the repayment of the High-Cost Home Loan. There is a rebuttable presumption that the applicant/borrower is able to make the scheduled payments to repay the obligation if, at the time the High-Cost Home Loan is Consummated, said borrower's total monthly debts, including amounts under the High Cost Home Loan, do not exceed fifty percent (50%) of said borrower's monthly gross income as verified by tax returns, payroll receipts, and other third-party income verification.2. A Creditor may not pay a contractor under a home-improvement contract from the proceeds of a High-Cost Home Loan, unless: a. the Creditor is presented with a signed and dated completion certificate showing that the home improvements have been completed; andb. the instrument is payable to the Applicant/borrower or jointly to the Applicant/borrower and the contractor, or, at the election of the Applicant/borrower, through a third-party escrow agent in accordance with terms established in a written agreement signed by the Applicant/borrower, the Creditor, and the contractor prior to the disbursement.3. A Creditor may not charge an Applicant/borrower any fees or other charges to modify, renew, extend, or amend a High-Cost Home Loan or to defer any payment due under the terms of a High-Cost Home Loan.4. A Creditor shall not make available a High-Cost Home Loan that provides for a late payment fee except as follows: a. The late payment fee shall not be in excess of three percent (3%) of the amount of the payment past due.b. The late payment fee shall only be assessed for a payment past due for fifteen (15) days or more or ten (10) days or more in cases of bi-weekly mortgage payment arrangement.c. The late payment fee shall not be imposed more than once with respect to a single late payment. If a late payment fee is deducted from a payment made on the High-Cost Home Loan, and the deduction causes a subsequent default on a subsequent payment, no late payment fee may be imposed for the default.d. A Creditor shall treat each payment as posted on the same business day as it was received.5. All High-Cost Home Loan documents that create a debt or pledge property as collateral shall contain the following notice on the first page in a conspicuous manner in at least 12-point font: "Notice: This a High-Cost Home Loan subject to special rules under state law. Purchasers or assignees of this High-Cost Home Loan may be liable for all claims and defenses by the borrower with respect to the High-Cost Home Loan."D. Additional Provisions Regarding High Cost Home Loans1. Rate Threshold: In determining whether the interest rate on a Home Loan meets or exceeds the "Rate Threshold" in R.I. Gen. Laws § 34-25.2-4(r)(1): a. the interest rate used shall be the Composite Rate for any Home Loan that is not a conventional fixed rate Home Loan; andb. the yield on comparable United States treasury securities in effect on the fifteenth (15th) day of the month immediately preceding the month in which the Home Loan application was received by the lender shall be determined using statistical release H.15 or any publication that may supersede it as published by the Board of Governors of the Federal Reserve System, applying the principles set forth in 12 C.F.R. § 226.32(a)(1)(i).2. Points and Fees Threshold: In determining whether total points and fees meets or exceeds the points and fees threshold in R.I. Gen. Laws § 34-25.2-4(r)(2), total Home Loan amount is defined as: a. the face amount of the Home Loan for closed-end credit;b. the total line of credit allowed as of the closing for open-end credit.3. Counseling: Upon determination that an Applicant is obtaining a High-Cost Home Loan, the Creditor must provide the applicant with Disclosure Form 4, provided in a bulletin issued by the Department for that purpose. The Creditor must provide the Applicant with Form 5 entitled "Consumer Caution and Homeownership Counseling Notice and Certification."E. R.I. Gen. Laws § 34-25.2-5(e) does not prohibit the waiver of the homestead exemption.230 R.I. Code R. 230-RICR-40-10-3.5